Saving for the long term is proactive and smart. However, certain questions need to be answered before you start.
According to the Journal of Financial Planning February 2015 Stat Bank, 74.5% of American families have some form of debt, 23% of survey respondents didn’t think personal financial stability was attainable and 66% wanted financial stability but were clueless on how to achieve it. Additionally, the Social Security Administration in its December 2013 Beneficiary Data report indicated the average monthly benefit received by retired workers, disabled workers, and survivors was $1,294, $1,146, and $1,244, respectively. Furthermore, of the approximately 165 million workers eligible for Social Security, 51% had no private pension options and 34% had nothing allocated for retirement. Whether compelling or disturbing, by 2033, the number of older Americans will increase from 46.6 million today to over 77 million. There are currently 2.8 workers for each Social Security beneficiary. By 2033, there will be 2.1 workers for each beneficiary.
You Should Be Concerned
According to a new survey by TIAA-CREF, nearly half of all Americans (46%) say they're concerned that they'll run out of money in retirement. Saving for the long term is proactive and smart. There is a bunch of information in the financial kerfuffle to go through and make sense of before self-investing or handing your money over to someone to do it for you. However, certain questions should be asked and answered: What is your risk tolerance for your expected return? Will your portfolio be diversified or have a concentration in certain asset classes? Moreover, do you know what percentage of your money will be allocated and to which asset classes? What rate of inflation will be factored into the final asset portfolio selected and the anticipated risk effect? As life’s challenges occur—often when least expected—what contingencies can be implemented on a moment’s notice? Will your portfolio allow for this, and at what cost? Are you comfortable with passive or active investing and is a combination acceptable? Obviously there are many more questions to consider.
Acquiring and diligently saving for your financial future is only one part of the equation. Having your portfolio adequately grow by maintaining a keen eye on the anticipated final destination takes patience, fortitude and understanding that there will be continual market gyrations. Ultimately, your portfolio’s ability to meet your future anticipated needs will depend on the sum total of what transpired over your financial time horizon, blips and all!
Options Exist for Your Retirement Savings
There are a myriad of investing options to explore depending on whether you are a solo practitioner, partner, employee, officer, or key person. Qualified retirement plans exist which allow an individual to potentially save large sums of current earnings towards retirement on a pre-tax basis. The advantage of having this deferral capability and less current tax exposure is appealing. However, if current tax deferral is not within your saving mantra, there is also an option to save using after-tax-dollar retirement accounts. Whether saving is in a 401(k), 403(b), 457, defined benefit or contribution plan, Simple or SEP, IRA or Roth based accounts, etc., options exist and allow for individual savings. Additionally, combinations of deferrals in assorted plans may also be an option depending on your gross income and employer scenario.
Conversely, another option for retirement savings is investing in a non-qualified account. Although available, this is generally used for specific retirement scenarios and for specific reasons or expected outcomes.
Planning: Self Directed or Ask for Help?
Whether self-directed or asking for professional financial help, it’s your money and decisions. Consideration should be given to working with a financial fiduciary professional, i.e. Certified Financial Planner (CFP). Your interests remain paramount because of anticipated prudent financial planning and advice.
Being eligible and receiving Social Security benefits is an ultimate right after working many years. However, realistically and based on the statistics available, the monthly benefit amount available would only be sufficient only to supplement your retirement needs rather than be the sole source of funding them. If planned adequately and correctly earlier in one’s work career, it is plausible to anticipate a greater amount of financial benefits can and should be expected from retirement savings. When you are ready to retire and after taking the due care in achieving your desired financial results, a stable retirement ought to be your just reward. You earned it!
H. William Wolfson, DC, FICC, MS, MPASSM, is a financial consultant and advisor. After passing the rigorous Certified Financial Planner™ examination, Dr. Wolfson obtained a Master of Science in Personal Financial Planning from the College for Financial Planning. He was subsequently awarded by the College a Master Planner Advanced Studies. Dr. Wolfson is a member of the Financial Planning Association (FPA). Dr. Wolfson retired after 27 years of practice and remains active volunteering his time to the continued education and success of colleagues. Dr. Wolfson may be contacted for consultation at firstname.lastname@example.org and view all his published articles at https://www.linkedin.com/pub/h-william-bill-wolfson/14/a55/226.